Canfor Earnings: Headwinds Compound as Lower Prices and Soft Demand Persist

No-moat-rated Canfor continued to navigate challenging lumber and pulp markets in the third quarter. Net sales fell 8% year over year while the company reported a CAD 560 million operating loss, largely due to impairments taken in the quarter in both the lumber and pulp businesses. Net of adjustments and one-time items, Canfor reported a CAD 139 million loss. Unfavorable market conditions continue to weigh heavily on Canfor’s businesses. During the quarter, Canfor navigated lower lumber prices, soft demand, and ample supply while pulp end markets suffered from weak demand in China. To address these challenges, Canfor announced mill closures in its lumber and pulp and paper businesses during the quarter, mainly to reduce its exposure to British Columbia. While we expect lumber prices will recover next year due to the removal of industry capacity in 2024, Canfor’s exposure to British Columbia and capacity curtailments could weigh on shipments. As such, we have maintained our CAD 20 fair value estimate.